Does corruption in the UK property market exist?

publication date: Jul 17, 2015
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Does corruption in the UK property market exist?

 

Proof is accumulating that UK property has become a safe harbour for corrupt capital stolen from elsewhere in the world. Transparency International’s recent report, Corruption on your Doorstep: How corrupt capital is used to buy property in the UK, accompanies its online campaign about corrupt assets – and the sheer volume of them coming into the UK market. For anyone with corrupt funds, a property in the UK can offer a secure and outwardly respectable investment, and a convenient hideaway should life become difficult at home.

How many properties are owned by foreign companies?
Transparency International’s research focused on the quantity and value of UK property linked to criminal investigations that in turn were involved in cases of grand corruption anywhere in the world. They established:-

 

  1. More than £180 million worth of UK property has been investigated as suspected proceeds of corruption since 2004.

  2. The UN suggests that average detection rates amount to a tiny 1% of total money-laundering activity.

  3. Of these properties, over 75% are registered in offshore secrecy jurisdictions that hide owners’ identities rather than key economies.

  4. The typical value of a property under criminal investigation is £1.5 million

  5. 48% of properties investigated were worth over £1 million.

TI-UK also established that:-

  1. 40,725 London property deeds are held by foreign companies

  2. 89% of these companies are incorporated in secrecy jurisdictions

  3. The British Virgin Islands leads at 13,831 properties (38%%)

  4. Jersey has 14%

  5. The Isle of Man at 8.5%

  6. Guernsey with 8%.


Close to 10% of City of Westminster properties are owned by such companies, followed by Kensington & Chelsea (7.3%) and the City of London (4.5%).

Government requires a Public Register
The pervasiveness of such companies in the UK market effectively scupper estate agents’ checks for money-laundering or compliance with international sanctions, and from October 2013 to September 2014, estate agents contributed to only 0.05% of all Suspicious Activity Reports submitted, a microscopic figure in the face of the risks money-launderers pose.


In an attempt to counter the UK’s growing reputation as a safe haven for global corruption, the Government has recently set out legislation requiring a public register showing true owners of UK-registered companies, but the property market is still susceptible to corrupt capital being invested, and British Overseas Territories consistently fail to respond to requests for transparency.

In 2011, £3.8 billion worth of UK property was bought by companies registered in the British Virgin Islands. In fact, many have not as yet addressed the money-laundering risks linked to secret offshore ownership by companies registered in their countries

Recommendations to help improve transparency of foreign company home ownership
Transparency International’s makes ten recommendations, chief among them being that foreign companies wishing to hold a UK property title should be subject to the same transparency standards of UK-registered companies.


It goes on to suggest measures that should be taken by HM Treasury, HM Revenue & Customs, and the Land Registry to bulk up protection against corrupt money-laundering in the UK. British Overseas Territories also have to be active in ending global corruption in the UK property market. For more information, see transparency.org.uk.

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Which? Property books and one of the UK's top property experts.
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